9 benefits of having happy employees

Guest blog: Following last week’s article on 7 ways to find more meaning at work, Elinor Schmitz-Jansen has continued her research. This week she covers the benefits of having happy employees:

Today, executives are well aware of issues such as the high cost of an employee leaving their job (on average, a manager or professional quitting costs 18 months worth of salary according to Thaler & Koval, 2006). Many would say that it is rather self-evident that happier employees are better for the company. But how much better? And aside from lower costs from retaining staff, what are the actual advantages of having happy employees?

Shawn Achor, author of the famous book The Happiness Advantage, comments on his analysis of over 200 scientific studies on happiness: “ [Happy employees] have higher levels of productivity, produce higher sales, perform better in leadership positions, and receive higher performance ratings and higher pay. They also enjoy more job security and are less likely to take sick days, to quit, or become burned out. Happy CEO’s are more likely to lead teams of employees who are both happy and healthy, and who find their work climate conducive to high performance” (2011, p.41). Let’s look at these claims in a little more detail.

Happiness encourages creativity. As firms increasingly find themselves in quickly changing and highly competitive markets, innovation and creativity has become the key to survival for many organisations. Alice Isen’s research suggests that being happy helps creativity since it frees up space in our brains and helps raise people’s mental flexibility, thereby increasing the chance of them combining unrelated elements in order to create something new (1999). In her study, she conducted a laboratory experiment whereby she divided participants into two groups. To the first group, she induced good moods by giving them gifts or making them watch funny clips. The other group did not receive any such treatment before the actual exercise. What she found was that the first group proved to perform at a much higher level in tasks related to creativity compared to the control group.

Happy employees are more accurate and have better analytical abilities. Achor’s research has also shown that doctors who are in a happy mood make diagnoses much more accurately, and 19% faster than neutral/unhappy doctors. However, this effect is not limited to doctors: in another study, students were primed to feel happiness through watching funny clips before a maths test. Again, the students who had seen the funny clips outperformed the control group by a large margin. A third study from the University of Toronto showed that our moods actually change how our brains process information. People in the study were primed for positive or negative feelings, and they were then asked to look at a series of pictures. Those who had been put in a negative mood did not manage to process as many pictures as their happy counterparts, thereby missing substantial bits of information (Gallagher, 2009).

Happy employees are better at handling adversity. This is something which has been physically proven by scientists: in a famous 1998 study, participants were given only one minute to come up with a speech on the topic “Why I am a good friend” (the actual speech never took place). After receiving these instructions, participants in the experiment instantly reported feeling nervous, and their cardiovascular response was that of rising blood pressure and heart racing. Afterwards, the participants were divided into four groups: each group was shown a joyful, content, neutral or sad movie. After the films, all groups eventually returned to their original emotional state. What was remarkable was how the groups who had experienced positive emotions (from the joyful or contentment films) exhibited the fastest recovery in their cardiovascular patterns from the earlier distress (in Lyubomirsky, 2007).

Happy employees equal lower costs. Although many of us could probably guess that happy employees are healthier, Gallup’s global health study (2008) has managed to quantify the average cost of an unhappy employee: these take significantly more sick leave, staying home on average of 1.25 days more a month, equivalent to 15 extra sick days per year.

Happy employees are better at sealing the deal. An in-depth study of negotiations in business deals showed that those employees who expressed more positive emotions prior to negotiating completed their deals more efficiently and successfully than the neutral/negatively feeling people in the same situation (Kopelman, Rosette & Thompson, 2006).

Happy employees provide better service: Gallup’s 2008 poll on employee happiness and service found that retail stores with happy employees reported $21 more earnings per square foot than “normal” workplaces, adding up to extra profits of $32 million for the entire chain (in Achor, 2012). Moreover, professor Goleman’s research has found that employee morale and the bottom line are directly correlated. A study from his book Primal Leadership showed that for every 2% increase in the “service climate” (ie how customer-focused and happy the employees were), revenue grew by 1% (2002).

Happy employees are more productive. There is a huge body of research confirming this. For example, a University of Warwick study (2014) showed that after people were exposed to happiness-inducing things such as comedy clips or little treats, their productivity in standardised tasks was vastly higher (here it should be added that the subjects that were given treats were not actually allowed to eat them before the experiment to ensure productivity did not spike due to increased blood sugar levels). Rath & Clifton observed that employees were much more productive when the ratio of positive to negative exchanges at work was at least three to one (2004). A Wharton Business School study found a long-term link between happier companies and shareholder returns – between 1994-2009, professor Alex Edmans’ studied the performance of the ‘100 best companies to work’ for in the US (according to Fortune magazine). His research showed that these companies outdid their peers by 2.3% better returns per year (Wallup, 2015).

Happy employees stay. Again, this might seem rather self-evident. Nonetheless, the importance of your employees being happy cannot be understated. Deloitte recently published a global report on HR, commenting on their findings: “Not only are happiness and contentment key to efficiency and effectiveness (…) they are also key retainers of talent for organisations” (2014). The global survey showed that those firms who prioritize employee retention have vastly better performing HR and Talent teams: out of the excellent/high performing HR and talent teams, 83% reported retention and engagement as “urgent” or “important” versus 79% of average performers.

Happy employees can be a part of a branding strategy and boost sales. This year, sandwich chain Pret a Manger has reported that sales have gone up with 16%. Management experts believe that the major cause behind the positive results is their positive staff. Indeed, the sandwich maker does prioritise the happiness of its staff. A few years ago, its CEO Clive Schlee famously said: “The first thing I look at is whether staff are touching each other – are they smiling, reacting to each other, happy, engaged? I can almost predict sales on body language alone.” (in Wallup, 2015). To enforce this behaviour, employees are paid a bonus if weekly secret shoppers report that they are faced with smiling staff – this bonus is given to everyone in their branch.

The author: Elinor Schmitz-Jansen is studying for an MSc in Management at Imperial College. She spent a week at Happy in April 2015 and will return to carry out more research in August 2015.

i have always taught it paramount that happy employees preform much better . A high morale is worth so much and performance is great . I see in nursing and Heath care a real lack of morale towards the care staff . Hence more stress- sick leave and lower interest trying to cope and tick all the boxes through out the day .